Monday, August 2, 2010

Entrepreneurs needed

For the second year in a row, Raul Castro gave a more substantial speech a few days after the 26th of July celebration than he did at the celebration itself – which wasn’t hard this year since he didn’t speak at all on July 26.

Speaking yesterday at the National Assembly, he joked a little about his non-speech, saying it’s the content that counts, not the speaker, and in the event el compañero Machado had done a bang-up job.He snickered at news agencies and “self-appointed ‘analysts’ of the Cuba issue” who raised expectations that he was going to announce capitalist solutions to Cuba’s economic problems that day.

Well, here’s what he announced yesterday.

First, a “group of measures” has been decided upon to achieve, “in steps, the reduction of considerably bloated payrolls in the state sector.”The state will continue to care for those in need and lend a hand to those who need to find new work, but he indicated that changes are in store in early 2011 that will save the state money and eliminate disincentives to work.“We have to erase forever the notion that Cuba is the only country in the world where one can live without working,” he said.

He also announced that more space for private entrepreneurship will be opened up by changing the rules governing self-employment, or trabajo por cuenta propia.

He didn’t announce details – that usually comes in a new law, regulations, or ministerial resolution – but he said that the Council of Ministers agreed to expand the “exercise” of self-employment and its “use as one more alternative for employment for excess workers.”The changes will be discussed in detail “soon” with labor leaders, he said, and presumably they would be announced thereafter.

He said the changes would include: a) eliminating some “current prohibitions” for granting of new licenses for self-employment; b) eliminating prohibitions against the “sale of some productions;” and c) easing restrictions (“flexibilizando”) on contracting of labor.

The real story will be in the details.Points A and B above could mean marginal or expansive change; it’s just a question of how far the new regulations go.

As for point C, if more flexibility in labor contracting means that cuentapropistas will be able to hire workers beyond the few areas where this is now legal, then this will indeed be a big change.He called the measures a “structural change and a change of concept” – a description that would fit a policy that allows Cubans to hire each other.

Raul also said that changes in the taxation system for cuentapropistas are forthcoming.He gave no details but he described the goals: to assure that they pay for social security, pay taxes for income and sales, and for “use of the labor force,” which sounds like a tax that one would pay per employee.

As in any tax system, what matters is not what the tax is for, but how much the entrepreneur has to pay, and what is left of his or her incentives once the tax is paid.

2 comments:

While the analysis is mostly on, the emphasis on entrepreneurship misses the point. If Cuba just wanted capitalists or entreprenuers, they could invite foreigners and emigrants to invest.

Instead, Cuba has reached a point where it can use market mechanisms for the pursuit of socialism. Workers in non-essential industries will be allowed to to operate on their own - as long as they pay their way in taxes and follow regulations. The "entreprenuers" will not be capitalists, hustlers or those with connections to Miami. They will be the Cuban workers themselves.